EDITA FOOD INDUSTRIES (S.A.E.) AND ITS SUBSIDIARIES

Transcription

1 EDITA FOOD INDUSTRIES (S.A.E.) AND ITS SUBSIDIARIES REVIEW REPORT AND CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD ENDED 31 MARCH IFRS

2 Consolidated interim financial statements IFRS Contents Page Review report... 1 Consolidated balance sheet... 2 Consolidated statement of profit or loss... 3 Consolidated statement of comprehensive income... 4 Consolidated statement of changes in equity... 5 Consolidated cash flows statement... 6 Notes to the consolidated interim financial statements

3 Review report To: The Board of Directors of Edita Food Industries Company (S.A.E.) and its Subsidiaries Introduction We have reviewed the accompanying consolidated balance sheet of Edita Food Industries Company (S.A.E.) and its Subsidiaries (the Group) as of and the related Consolidated statements of Profit or loss, comprehensive income, changes in equity and cash flows for the three months period then ended, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards. Our responsibility is to express a conclusion on these consolidated interim financial statements based on our limited review. Scope of review We conducted our review in accordance with Egyptian Standard on Review Engagements No. 2410, Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A limited review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A limited review is substantially less in scope than an audit conducted in accordance with Egyptian Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on these consolidated interim financial statements. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements does not present fairly in all material respects, the financial position of the Group as at, and of its financial performance and its cash flows for the three months period then ended in accordance with International Financial Reporting Standards. Mohamed Ahmed Fouad, CPA R.A.A E.F.S.A. 235 Mansour & Co. PricewaterhouseCoopers 10 May Cairo

4 EDITA FOOD INDUSTRIES (S.A.E) AND ITS SUBSIDIARIES Consolidated balance sheet "IFRS" - At (All amounts in Egyptian Pounds) 31 December Note Assets Non-current assets Property, plant and equipment 5 1,639,756,359 1,474,461,243 Intangible assets 6 162,911, ,911,642 Total non-current assets 1,802,668,001 1,637,372,885 Current assets Inventories 7 308,032, ,428,559 Trade and other receivables 8 162,488, ,668,474 Treasury bills 9 181,690, ,144,828 Cash and cash equivalents (excluding bank overdrafts) 10 89,470,082 90,465,545 Total current assets 741,680, ,707,406 Total assets 2,544,348,610 2,435,080,291 Liabilities Non-current liabilities Long-term loans ,613, ,825,757 Deferred tax liabilities 12 93,685,309 86,492,634 Employee benefit obligations 13 2,195,034 1,945,034 Total non-current liabilities 669,493, ,263,425 Current liabilities Trade and other payables ,609, ,349,109 Current income tax liabilities 15 2,275,334 1,233,553 Current portion of long-term loans ,258, ,232,334 Bank overdraft ,969, ,473,897 Provisions 17 19,114,872 19,166,385 Total current liabilities 816,227, ,455,278 Total liabilities 1,485,720,929 1,306,718,703 Net assets 1,058,627,681 1,128,361,588 Equity Share capital ,072, ,072,580 Legal reserve 19 48,745,291 48,745,291 Foreign currency translation reserve (203,607) (162,824) Retained earnings 847,872, ,722,773 Capital and reserves attributable to owners of Edita Food Industries 1,041,486,670 1,113,377,820 Non-controlling interests 20 17,141,011 14,983,768 Total equity 1,058,627,681 1,128,361,588 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Mr. Sameh Naguib Vice President - Finance Eng Hani Berzi Chairman Giza, 10 May Review report attached - 2 -

5 Consolidated statement of profit or loss (All amounts in Egyptian Pounds) Note Revenue 642,446, ,090,393 Cost sales 26 (422,603,429) (312,418,795) Gross profit 219,842, ,671,598 Distribution cost 26 (106,182,163) (74,906,759) Administrative expenses 26 (48,850,789) (43,516,226) Other income 21 3,875,251 4,124,013 Other (losses) / gains - net 22 (737,019) (1,779,352) Profit from operations 67,948,001 89,593,274 Finance income 23 9,887,711 8,444,241 Finance cost 23 (27,025,057) (55,124,658) Finance (cost) income, net (17,137,346) (46,680,417) Profit before income tax 50,810,655 42,912,857 Income tax expense 24 (10,457,388) (10,245,035) Net profit for the period 40,353,267 32,667,822 Net Profit is attributable to Shareholders' equity 38,196,024 31,506,712 Non-controlling interest 2,157,243 1,161,110 Net profit for the period 40,353,267 32,667,822 Earnings per share (expressed in EGP per share): Basic earnings per share Diluted earnings per share The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes

6 EDITA FOOD INDUSTRIES (S.A.E) AND ITS SUBSIDIARIES Consolidated statement of comprehensive income (All amounts in Egyptian Pounds) Profit for the period 40,353,267 32,667,822 Items that may be reclassified to profit or loss Other comprehensive income for the period net of tax (40,783) (23,504) Total comprehensive income for the period 40,312,484 32,644,318 Total comprehensive income is attributable to Owners of the parent 38,196,024 31,483,208 Non-controlling interest 2,157,243 1,161,110 Total comprehensive income for the period 40,353,267 32,644,318 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes

7 Consolidated statement of changes in equity (All amounts in Egyptian Pounds) Total Owners' Equity Paid up capital Bonus shares under capital increase Legal reserve Foreign currency translation reserve Retained earnings Total shareholders Noncontrolling interest Total owners' equity Balance at 1 January 72,536,290-38,947,275 5,568 1,057,715,965 1,169,205,098 5,617,437 1,174,822,535 Employees dividends accruals (Note 14) (22,995,460) (22,995,460) - (22,995,460) Total equity at 1 January 72,536,290-38,947,275 5,568 1,034,720,505 1,146,209,638 5,617,437 1,151,827,075 Net profit for the period ,506,712 31,506,712 1,161,110 32,667,822 Other comprehensive income for the period (23,504) - (23,504) - (23,504) Total other comprehensive income for the period - - (23,504) 31,506,712 31,483,208 1,161,110 32,644,318 Dividends distribution for (81,032,063) (81,032,063) - (81,032,063) Bonus shares under capital increase - 72,536, (72,536,290) Balance at 72,536,290 72,536,290 38,947,275 (17,936) 912,658,864 1,096,660,783 6,778,547 1,103,439,330 Balance at 1 January 145,072,580-48,745,291 (162,824) 919,722,773 1,113,377,820 14,983,768 1,128,361,588 Net profit for the period ,196,024 38,196,024 2,157,243 40,353,267 Other comprehensive income for the period (40,783) - (40,783) - (40,783) Total other comprehensive income for the period - - (40,783) 38,196,024 38,155,241 2,157,243 40,312,484 Dividends distribution for (110,046,391) (110,046,391) - (110,046,391) Balance at 145,072,580-48,745,291 (203,607) 847,872,406 1,041,486,670 17,141,011 1,058,627,681 The above consolidated statement of changes in shareholders' equity should be read in conjunction with the accompanying notes

8 EDITA FOOD INDUSTRIES (S.A.E) AND ITS SUBSIDIARIES Consolidated statement of cash flows (All amounts in Egyptian Pounds) Notes Cash flows from operating activities Cash inflow / (outflow) operations ,494,049 (7,234,969) Interest paid (25,345,053) (14,360,613) Income tax paid (2,222,932) (1,277,650) Net cash inflow / (outflow) operating activities 112,926,064 (22,873,232) Cash flows from investing activities Purchase of property, plant and equipment 5 (192,195,806) (48,714,226) Proceeds from sale of property, plant and equipment 1,116, ,320 Interest received 10,265,304 9,612,340 Payment for purchase of treasury bills (179,497,180) (148,440,349) Proceeds from sale of treasury bills 189,574, ,644,260 Net cash outflow investing activities (170,736,892) (40,497,655) Cash flows from financing activities Repayment of borrowings (102,632,535) (134,916,606) Proceeds from borrowings 146,993, ,845,452 Net cash inflow financing activities 44,360,806 3,928,846 Net (decrease) in cash and cash equivalents (13,450,022) (59,442,041) Cash and cash equivalents at beginning of the Period (150,008,352) 239,645,624 Effects of exchange rate on cash and cash equivalents (40,783) (23,504) Cash and cash equivalents at end of the Period 10 (163,499,157) 180,180,079 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

9 Notes to the consolidated interim financial statements IFRS 1. General information Edita Food Industries S.A.E. was established in July 9, 1996, under the investment Law No. 230 of 1989 which had been replaced by law No. 8 of 1997 and the money market Law No. 95 of 1992, and is registered in the commercial register under number 692 Cairo. The Group provides manufacturing, producing and packing of all food products and producing and packing of juices, jams, readymade food, cakes, pastry, milk products, meat, vegetables, fruits, chocolate, vegetarian products and other food products with all necessary ingredients. The Group s financial year start on 1 January and ends on 31 December each year. The main shareholders are BERCO Limited which owns % of the Company s share capital and the Bank of New York Mellon which owns % of the Company share capital and Exoder participation, Exoder Limited, domiciled in Cyprus which owns % of the Company s share capital and Africa Samba B.V. which owns 7.5% of Company s share capital and other shareholders owning % of company s share capital. These consolidated financial statements have been approved by the board of directors and taken into account that the General Assembly Meeting has the right to amend the consolidated financial statements after issuance. Consolidated financial statements of the Group comprise financial statements of Edita Food Industries Company (S.A.E.) and its subsidiaries (together referred to as the Group ). Edita Food Industries: Edita food industries is the holding company. The company provides manufacturing, producing and packing of all food products and producing and packing of readymade food, cakes, pastry, milk, chocolate and other food products with all necessary ingredients and sell the products to Digma for Trading. The group s principal subsidiaries at 31 December are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business. Digma for Trading: Digma for trading main activity is wholesale and retail trading in consumable goods. The Company also acts as a distributor for local and foreign factories and companies producing these goods and also imports and exports, in accordance with laws and regulations. The company buys from Edita confectionery industries and Edita food industries and distributes to others. Edita Confectionery Industries: The company s purpose is to build and operate a factory for production, sales of distributions of Sweets, Toofy, Jelly and Caramel other nutrition materials and sell the products to Digma for Trading. Edita participation limited: The principal activities of the company are the provision of services and the holding of investments but the Company does not have any operations until now and all its transactions are immaterial - 7 -

10 Notes to the consolidated interim financial statements IFRS General information (continued) Name of entity Place of business/ country of incorporation Ownership interest Ownership interest held by the group held by noncontrolling interests Digma for trading Egypt 99.8 % 99.8 % 0.2 % 0.2 % Edita Confectionery Industries Egypt % % % % Edita participation limited Cyprus 100 % 100 % - - Financial information about the subsidiaries of the group as at and Net Profit/ Name of subsidiary Total Assets Total Equity Total Sales (loss) Digma for trading 292,602, ,068, ,219,485 10,354,497 Edita Confectionery Industries 175,365,355 76,672,161 35,245,414 9,585,170 Edita participation limited 163,466 (182,007) - - Net Profit/ Name of subsidiary Total Assets Total Equity Total Sales (loss) Digma for trading 317,670, ,177, ,301,664 16,005,516 Edita Confectionery Industries 116,379,860 29,931,506 24,169,291 5,065,497 Edita participation limited 174,255 (138,547) - (11,467) The above mentioned financial information are related to amounts as included in the separate financial statements which have been used in the consolidation 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these Interim Consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. A. Basis of preparation I. Compliance with IFRS The consolidated financial statements of Edita food industries and its subsidiaries the group have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). II. Historical cost convention These financial statements have been prepared under the historical cost basis

11 Notes to the consolidated interim financial statements IFRS Basis of preparation (continued) III. IV. New and amended standards adopted by the group The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January : Accounting for acquisitions of interests in joint operations Amendments to IFRS 11 Clarification of acceptable methods of depreciation and amortization Amendments to IAS 16 and IAS 38 Annual improvements to IFRSs cycle, and Disclosure initiative amendments to IAS 1. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December reporting periods and have not been early adopted by the group. The group s assessment of the impact of these new standards and interpretations is set out below. Title of standard Nature of change Impact IFRS 9 Financial Instruments IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. While the group has yet to undertake a detailed assessment of the classification and measurement of financial assets, debt instruments currently classified as available-for-sale (AfS) financial assets would appear to satisfy the conditions for classification as at fair value through other comprehensive income (FVOCI) and hence there will be no change to the accounting for these assets. The other financial assets held by the group include: equity instruments currently classified as AFS for which a FVOCI election is available equity investments currently measured at fair value through profit or loss (FVPL) which would likely continue to be measured on the same basis under IFRS 9, and debt instruments currently classified as held-to-maturity and measured at amortized cost which appear to meet the conditions for classification at amortized cost under IFRS 9. Accordingly, the group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets. There will be no impact on the group s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed

12 Notes to the consolidated interim financial statements IFRS Basis of preparation (continued) Title of standard Mandatory application date/ Date of adoption by group Title of standard Nature of change Impact Mandatory application date/ Date of adoption by group Title of standard Nature of change Impact Mandatory application date/ Date of adoption by group IFRS 9 Financial Instruments Must be applied for financial years commencing on or after 1 January Based on the transitional provisions in the completed IFRS 9, early adoption in phases was only permitted for annual reporting periods beginning before 1 February After that date, the new rules must be adopted in their entirety. The group does not intend to adopt IFRS 9 before its mandatory date. IFRS 15 Revenue from Contracts with Customers The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognized when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Accordingly, the group does not expect the new guidance to have a significant impact on the recognition and measurement of revenue. Mandatory for financial years commencing on or after 1 January Expected date of adoption by the group: 1 January IFRS 16 Leases IFRS 16 was issued in January. It will result in almost all leases being recognized on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. Accordingly, the group does not expect the new guidance to have a significant impact on the recognition and measurement of leasing contracts. Mandatory for financial years commencing on or after 1 January At this stage, the group does not intend to adopt the standard before its effective date. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions

13 Notes to the consolidated interim financial statements IFRS B. Basis of consolidation 1. Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively. 2. Associates Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. 3. Joint arrangement Under IFRS 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Group doesn t have any joint operations or joint ventures. 4. Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group s share of the post-acquisition profits or losses of the investee in profit or loss, and the group s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the group s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group

14 Notes to the consolidated interim financial statements IFRS Basis of consolidation (continued) 5. Changes in ownership interests Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. C. Principles of consolidation and equity accounting When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss. D. Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The board of EDITA FOOD INDUSTRUES has appointed a chief operating decision-maker who assess the financial performance and position of the group, and makes strategic decisions. Which has been identified as the chief executive officer. E. Foreign currency translation (1) Functional and presentation currency Items included in the financial statements each of the group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Egyptian Pound (EGP), which is Edita food industries functional and presentation currency. (2) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss, they are deferred in equity if they are attributable to part of the net investment in foreign operations. Foreign exchange gains and losses that relate to Loans and Cash and cash equivalents are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains / (losses) net

15 Notes to the consolidated interim financial statements IFRS Foreign currency translation (continued) Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income. (3) Group companies The results and financial position of foreign operations (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; (b) income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (c) All resulting exchange differences are recognized in other comprehensive income. On consolidation, exchange differences arising from translation of the net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income. F. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group s activities, as described below. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement

16 Notes to the consolidated interim financial statements IFRS Revenue recognition (continued) (1) Sales of goods whole sale Sales of goods are recognized when group has delivered products to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler s acceptance of the products. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the group has objective evidence that all criteria for acceptance have been satisfied. (2) Interest income Interest income is recognized using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognized using the original effective interest rate. (3) Dividend income Dividend income is recognised when the right to receive payment is established. (4) Export subsidy The Company obtains a subsidy against exporting some of its production. The subsidy is calculated based on a percentage from the total exports invoices determined by the Export Development Fund related to the Commercial and Industry Ministry. Export subsidy is recognized in the statement of profit or loss as other income when received in cash after meeting all required criteria. G. Income tax The income tax expense or credit for the period is the tax payable on the current period s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled

17 Notes to the consolidated interim financial statements IFRS Income tax (continued) The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property will be recovered entirely through sale. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. H. Leases Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset s useful life or over the shorter of the asset s useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statements of Profit or loss on a straightline basis over the period of the lease

18 Notes to the consolidated interim financial statements IFRS I. Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets transferred liabilities incurred to the former owners of the acquired business equity interests issued by the group fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisitionby-acquisition basis at the non-controlling interest s proportionate share of the acquired entity s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. J. Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgenerating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period

19 Notes to the consolidated interim financial statements IFRS K. Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown in current liabilities in the balance sheet. L. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are amounts due from customers for goods sold in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. M. Inventories Inventories are stated at the lower of cost or net realisable value. Cost comprises direct materials, direct labour, other direct costs and an appropriate proportion of variable and fixed overhead expenditures, the latter being allocated on the basis of normal operating capacity but excludes borrowing costs. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and estimated costs necessary to make the sale, And the provision for obsolete inventory is created in accordance to the management s assessment.. N. Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised

20 Notes to the consolidated interim financial statements IFRS Non-current assets (or disposal groups) held for sale and discontinued operations (continued) Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss. O. Financial assets (1) Classification The group classifies its financial assets in the following categories, loans and receivables, and Held to maturity (treasury bills). The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and in the case of assets classified as held to maturity, re-evaluates this designation at the end of each reporting period. (2) Reclassification Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held for trading or available-for-sale categories if the group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. (3) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership

21 Notes to the consolidated interim financial statements IFRS Financial assets (continued) (4) Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method. Interest on held-to-maturity investments and loans and receivables calculated using the effective interest method is recognised in the statement of profit or loss as part of revenue from continuing operations. (5) Impairment The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. As a practical expedient, the group may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. P. Property, plant and equipment All property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statements of Profit or loss during the financial year in which they are incurred. Land is not depreciated

22 Notes to the consolidated interim financial statements IFRS Property, plant and equipment (continued) Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual value over their estimated useful lives, as follows: Buildings Machinery & equipment Vehicles Tools & equipment Furniture & office equipment years 20 years 5 8 years 3-5 years 4-5 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other gains / (losses) in the statement of profit or loss. Q. Intangible assets Intangible assets (Trademarks & know how) have indefinite useful lives as there is no foreseeable limit on the period of time over which the brands are expected to exist and generate cash Flows, and are carried at cost less impairment losses. Historical cost includes all expenses associated with the acquisition of an intangible asset, The trademark and know how is recognized as an indefinite intangible asset as the license is perpetual, irrevocable and exclusive including the trademark in the territory related to cake products. The brand has an established presence in the territory since nineteenth. In addition, the group has a strong historic financial track-record and forecasts continued growth also, the knowhow of perpetual license not exposed to typical obsolescence as it relates to a food products. The brand remain popular in the Middle East and the group does not foresee any decline in the foreseeable future. R. Trade and other payables These amounts represents liabilities for goods or services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method

23 Notes to the consolidated interim financial statements IFRS S. Loans Loans are recognized initially at fair value, net of transaction costs incurred. Loans are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of profit or loss over the period of the Loans using the effective interest method. Loans are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income or finance costs. Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognized in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. Loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. T. Borrowing costs General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific Loans pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are recognized in profit or loss in the period in which they are incurred. U. Provisions Provisions are recognized when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management s best estimate to the expenditures required to settle the obligation at the end of the period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to passage of time is recognised as interest expense